Compute NPV, IRR, Payback period and profitable index.
The Signal Company is planning on investing in a new project. This will involve the purchase of some new machinery costing $450,000. The Signal Company expects cash inflows from this project as detailed below:
|
Year 1
|
Year 2
|
Year 3
|
Year 4
|
|
$200,000
|
$225,000
|
$275,000
|
$200,000
|
The appropriate discount rate for this project is 16%. Show calculations.
a) What is the payback period for this project?
b) What is the IRR for this project?
c) What is the profitability index for this project?
d) What is the NPV for this project?